Baba Farid Public Welfare Society, Bathinda V. The Commissioner of Income Tax (Exemption), Chandigarh

ITA 470/ASR/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1201 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-03-2019
• Assessment Year: 2016-2017
• Appeal Filed On: 22-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Opportunity of being heard
• Section: 12; 11; 12A; 12AA; 13; 10(23C)

Judgement Text

IN THE INCOME TAX APPELLATE TR IBUNAL AMRITSAR BENCH, AMRIT SAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AN D SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.470 (ASR)/2016 ASSESSMENT YEAR:2 016-17 BABA FARID PUBLIC WELFARE SOCIETY, VILLAGE UBHA, MANSA, BATHINDA. [PAN:AAAAB 5557C] VS. CIT (EXEMPTION), CHANDIGARH. (APPELLANT) (RESPONDENT) APPELLANT BY: J.K.GUPTA (LD. ADV.) RESPONDENT BY: SMT. ABHA RANI SINGH (LD. CIT-DR) DATE OF HEARING: 05.03.2019 DATE OF PRONOUNCEMENT: 04.06.2019 ORDER PER N.K.CHOUDHRY, JM: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE APPELLAN T AGAINST THE ORDER DATED 27.07.2016 PASSED BY THE LD. CIT(EXEMPTIONS), CHANDIGARH, U/S 12AA(1)(B)(II) OF T HE I.T. ACT, 1961 (HEREINAFTER CALLED AS THE ACT). 2. THE APPELLANT SOCIETY HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND LAW, THE LEARNED CIT (EXEMPTION) HAS ERRED IN DENYING THE REGISTRATION U/S 12A OF THE INCOME TAX ACT, 1961. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED CIT (EXEMPTION) HAS ERRED IN GIVING A FINDING THAT THE TRUST IS NOT DOING CHA RITABLE OBJECTS WHEN ASSESSEE IS RUNNING A HIGHER SECONDARY SCHOOL ON NO PROFIT BASIS. ITA NO.470/ASR/2016 (A.Y.2016-17) BABA FARID PUBLIC WELFARE SOCIETY VS. CIT(E) 2 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED CIT(EXEMPTION) HAS ERRED IN GIVING A FINDING THAT NO ACTIVITY LEAST OF SAY ING ANY CHARITABLE ACTIVITY IS BEING CARRIED OUT IN VIE W OF ABOVE. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED CIT (EXEMPTION) HAS ERRED IN GIVING A FINDING THAT THE SOCIETY IS NOT REGISTERED AS THE SAME IS REGISTERED WITH ADDITIONA L REGISTRAR OF SOCIETY, MANSA AT SERIAL NO. 420 DATED 14.03.2005 AND THE ORIGINAL WAS PRODUCED ON 19.07.2016 BEFORE DCIT (E), CHANDIGARH DURING THE COURSE OF HEARING FOR REGISTRATION U/S 12A OF THE A CT. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT (EXEMPTION) WAS ONLY REQUIRED TO SEE IF THE OBJECTS ARE CHARITABLE AND WHETHER THE TRUST IS GENUINE AND NOTHING MORE. 6. THAT ANY OTHER RELIEF MAY KINDLY BE GRANTED TO THE ASSESSEE TO WHOM IT IS FOUND ENTITLED AT THE TIME O F HEARING OF APPEAL. 3. BRIEF FACTS OF THE CASE ARE AS UNDER:- AS PER FACTS, THE ASSESSEE/SOCIETY IS AN ONGOING ENTITY AND HAS BEEN IN OPERATION SINCE 14.03.2005 WITH THE AIMS AN D OBJECTS TO PROMOTE EDUCATION, IN SEVERAL FIELDS PRIMARY, SECONDARY, TECHNICAL, INDUSTRIAL, ELECTRONICS, MANAGERIA L AND PHARMACEUTICAL SO AS TO ENABLE THE STUDENTS SEEK JOB-ORIEN TED AND SELF EMPLOYMENT, BY OPENING INSTITUTIONS FOR BOYS AND GIRLS WITHOUT ANY RESTRICTIONS OF CASTE, CREED, COMMUNITY AND F AITH OF THE STUDENT. THE ASSESSEE SOCIETY IS MAINLY RUNNING A SCHOO L IN THE NAME AND STYLE OF 'BABA FARID ACADEMY PUBLIC SCHOOL , UBHA' AND HAS BEEN CLAIMING EXEMPTION OF INCOME UNDER SECTION 10(23C)(IIIAD) IN THE PAST. THE ASSESSEE SOCIETY WHILE FILING AN APPLICATION ON DATED 21.01.2016 SOUGHT REGISTRATION U/S 12AA OF THE INCOME T AX ACT, 1961. THE APPLICATION OF THE ASSESSEE WAS TAKEN INTO ITA NO.470/ASR/2016 (A.Y.2016-17) BABA FARID PUBLIC WELFARE SOCIETY VS. CIT(E) 3 CONSIDERATION BY THE LD. CIT(E) AND IN ORDER TO EXAMI NE THE RATIONALE BEHIND THE CLAIM FOR REGISTRATION UNDER THE RELEVANT SECTION, QUESTIONNAIRE/LETTER DATED 23.02.2016 WAS SENT BY THE LD. CIT(E), WHICH WAS RESPONDED BY THE ASSESSE ON DATED BY 22- 04-2016 BY FILLING REPLY. THEREAFTER VIDE LETTER DA TED 08.07.2016, THE ASSESSEE WAS ACCORDED ANOTHER OPPORTUNITY TO FURNISH, ON THE BASIS OF MATERIAL AVAILABLE WITH THE APPLICATION A ND SUBSEQUENT SUBMISSIONS, CERTAIN DETAILS AND CLARIFICATIONS A S MENTIONED IN PARA NO. 5 OF THE IMPUGNED ORDER, WHICH WAS ALSO RESPONDED ON DATED 19.07.2016 BY FILLING WRITTEN REP LIES TO THE QUERIES RAISED VIDE LETTER DATED 08.07.2016. HOWEVER ST ILL THE LD. CIT (E) REJECTED THE ASSESSEE'S APPLICATION FOR GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT. 4. AGGRIEVED AGAINST THE ORDER IMPUGNED HEREIN, THE ASSESSEE PREFERRED THE INSTANT APPEAL. THE LD. AR IN ADD ITION TO RAISING MANY ISSUES AND CONTROVERTING THE FINDIN GS OF THE LD. CIT(E) IN THE ORDER, ALSO SUBMITTED THAT TH E INSTANT CASE IS SQUARELY COVERED BY THE DECISION O F THE CO-ORDINATE BENCH AT AMRITSAR IN THE CASE OF THE MANAGING COMMITTEE, ARYA HIGH SCHOOL VS. CIT(E), CHANDIGARH (ITA NO. 469/ASR/2016, DECIDED ON DATED 11.08.2017) WHICH HAS BEEN AFFIRMED BY THE JURISDICTIONAL HIGH COURT IN ITA NO.51/2018 VIDE IT S ORDER DATED 16.05.2018 AND THE APEX COURT IN THE CA SE TITLED AS COMMISSIONER OF INCOME TAX (EXEMPTIONS) V S. THE MANAGING COMMITTEE, ARYA HIGH SCHOOL [2019] 102 TAXMAN COM 44 (SC). 5. ON THE CONTRARY THE LD. DR VEHEMENTLY REFUTED T HE CLAIM OF THE ASSESSEE AND SUBMITTED THAT THE ORDER ITA NO.470/ASR/2016 (A.Y.2016-17) BABA FARID PUBLIC WELFARE SOCIETY VS. CIT(E) 4 UNDER CHALLENGE HAS BEEN PASSED IN PECULIAR FACTS A ND CIRCUMSTANCES AND IN ACCORDANCE WITH LAW, THEREFORE , DOES NOT REQUIRE ANY INFERENCE. 6. HAVING HEARD THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. CIT(E) DENIED THE REGI STRATION TO THE SOCIETY BY OBSERVING AS UNDER : 5. (I) IT IS BROUGHT OUT THE APPLICANT HAS DONE NO AD DITION TO THE SCHOOL AND BUILDING PREMISES OVER A PERIOD OF 5 YEA RS EXCEPT IN THE LAST YEAR DESPITE GENERATING LARGE SCALE SURPLUSES. IT HAS FURTHER ACCUMULATED LARGE SCALE CASH IN HAND BALANCES WHICH CLEARLY SHOW THAT NOT ONLY HAS THE APPLICANT GENERATED LARGE SCALE SURPLUSES BUT ALSO NOT UTILIZED THE SAM E IN BETTERMENT OF FACILITIES OF THE SCHOOL. IT IS ALSO RELEVANT THAT THE CASH IN HAND BALANCES DO NOT FIT IN THE PRESCRI BED MODES AS ENVISAGED BY SECTION 11 OF THE I T ACT A CONDITI ON IT SHOULD HAVE BEEN ADHERED TO GIVEN THAT IT HAS BEEN CLAIMIN G EXEMPTION UNDER SECTION 10(23C)(IIIAD). A.Y. CASH IN HAND BUILDING A/C OPENING BALANCE FOR THE F.Y W.D.V. AT THE END OF F.Y. 2015-16 37,84,395 11,67,965 (3,69,250 ADDED) 14,01,956 2014 - 15 16,21,766 12,97,739 11,67,965 2013 - 14 12,20,078 14,41,932 12,97,739 2012-13 8,10,674 16,02,147 14,41,932 I 2011 -12 7,92,894 15,40,543 16,02,147 (II) ANOTHER RELEVANT ISSUE THAT EMERGES FROM THE AUDIT REPORT IS THE FACT THAT SAID REPORTS ARE IN FORM NO . 3CB APPLICABLE TO ENTITIES RUNNING ON COMMERCIAL BASIS (BARRING AUDIT REPORT FOR AY 2015-16 THAT SEEMS TO HAVE BEEN PREPARED AS PER THE REQUIREMENTS OF EXEMPTED ENTITI ES OR THOSE SEEKING EXEMPTION). THE PREVIOUS RETURNS AND THE ASSOCIATED STATEMENTS OF ACCOUNTS ALSO EXEMPLIFY TH AT THE SAME IS BEING RUN ON COMMERCIAL PRINCIPLES. FOR E.G . RATIOS ITA NO.470/ASR/2016 (A.Y.2016-17) BABA FARID PUBLIC WELFARE SOCIETY VS. CIT(E) 5 W.R.T NET PROFIT COMPARED TO TURNOVER HAVE BEEN ARR IVED AT AND EXEMPLIFIED IN THE AUDIT REPORTS. RATIOS OF 13. 68% FOR THE YEAR 2011-12 AND 15.63% FOR 2012-13 ARE INSTANCES S HOWING THE SAME. (III) THE APPLICANT SOCIETY HAS BEEN CLAIMING EXEMPTIO NS U/S 10(23C)(IIIAD) OF THE ACT FOR THE LAST THREE YE ARS AND YET HAS CHOSEN TO SEEK REGISTRATION U/S 12AA OF THE ACT WHEREAS THE NATURAL PROGRESSION SHOULD HAVE BEEN CLAIM UNDE R SECTION 10(23C)(VI) IN THE EVENT OF ITS RECEIPTS CR OSSING THE 1 CRORE MARK. JUDICIAL PRINCIPLES LAY DOWN THAT EXEMP TION UNDER THE TWO SECTIONS COULD BE CLAIMED ALTERNATIVE LY. HOWEVER IT HAS NOT BEEN LAID OUT THAT ENTITIES WHO HAVE ENJOYED THE BENEFITS OF A PARTICULAR SECTION SUDDEN LY DECIDE TO SWITCH TO ANOTHER WHERE THE CONDITIONS OF APPLIC ABILITY ARE ENTIRELY DIFFERENT. DOES IT MEAN IN THE INSTANT CAS E THAT AN ENTITY THAT WAS CLAIMING TO EXIST HITHERTO AS 'SOLE LY FOR EDUCATION' AND 'NOT FOR PROFITS' HAS CHANGED ITS CH ARACTER OVERNIGHT? THE FINDINGS MENTIONED ABOVE DO NOT LEND CREDENCE TO THE ALTRUISTIC INTENT OF THE APPLICANT. IN FACT WHAT HAVE BEEN BROUGHT OUT ARE LARGE SCALE GENERATION OF CASH AND NO REDEPLOYMENT OF THE PROFITS TOWARDS IMPROVING TH E AVOWED PURPOSE OF EDUCATION (RUNNING OF SCHOOL). (IV) NO CORROBORATIVE EVIDENCE IN RESPECT OF ASSETS/ PROPERTY IN THE NAME OF THE SOCIETY INCOME FROM WHI CH WAS SOUGHT TO BE EXEMPTED WAS BROUGHT ON RECORD EITHER. (V) ORIGINALS OF THE PAPERS EVIDENCING THE FORMATION OF THE SOCIETY REGISTRATION OF THE BY E-LAWS WERE NOT FURN ISHED. IT IS SEEN FROM THE PAPERS FILED THAT 'RULES AND REGULATI ONS' ARE NOT REGISTERED. NEITHER HAS ANY EVIDENCE BEEN APPENDED IN SUPPORT OF ANY RESOLUTIONS ETC TO THIS EFFECT. 8. IN THE INSTANT CASE, GIVEN ALL OF THE ABOVE, TH ERE IS NO WAY THE GENUINENESS OF ACTIVITIES OF THE SOCIETY CAN BE COR ROBORATED WITH THE STATED AIMS AND OBJECTS. MOREOVER THE DISCUSSIONS ALSO REVEAL THAT THE ENTITY HAS BEEN GENERATING SURPLUSE S IN CASH THAT HAVE NOT BEEN REDEPLOYED FOR THE PURPOSE OF EDUCATI ON. IT IS ALSO THE CASE THAT THE PRESENT APPLICATION UNDER SECTION 12AA, GIVEN THAT THE APPLICANT HAS PURSUED NO OTHER OBJECT APAR T FROM RUNNING A SCHOOL, IS MISCONCEIVED. THE APPLICATION UNDER SECTION 12A FOR GRANT OF REGISTRATION IS ACCORDINGLY REJECT ED. 6.1 LET US TO PERUSE THE RELEVANT PROVISIONS OF LAW , WHICH DEALS WITH THE CONSIDERATION OF APPLICATION F OR REGISTRATION U/S 12A OF THE ACT. SECTION 12AA ITA NO.470/ASR/2016 (A.Y.2016-17) BABA FARID PUBLIC WELFARE SOCIETY VS. CIT(E) 6 (1) THE CHIEF COMMISSIONER OR COMMISSIONER, ON RECE IPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUT ION MADE UNDER CLAUSE (A) [OR CLAUSE (AA) OF SUB-SECTION (1) ] OF SECTION 12A, SHALL (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDE R TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF T HE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE - (I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDE R IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTI ON, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD . FROM THE PROVISIONS, IT IS CLEAR THAT BEFORE DECIDING THE APPLICATION U/S 12A OF THE ACT, THE COMMISSIONER IS AT LIBERTY TO CALL FOR SUCH DOCUMEN TS OR INFORMATION FROM THE SOCIETY OR INSTITUTION AS HE T HINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE SOCIETY OR INSTITUTION AND MAY ALSO MADE SUCH ENQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF. FURTHER BEFORE PASSI NG AN ORDER, THE LD. CIT(E) IS EMPOWERED TO SATISFY HIMSELF ABOUT THE AIMS AND OBJECTS OF THE SOCIETY O R INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES. 6.2 WHILE COMING TO THE INSTANT CASE AS OBSERVED BY LD. CIT(E) ITSELF THAT THAT ASSESSEE SOCIETY IS AVA ILING EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT IN THE PAS T. AT ITA NO.470/ASR/2016 (A.Y.2016-17) BABA FARID PUBLIC WELFARE SOCIETY VS. CIT(E) 7 THIS JUNCTURE THE ASSESSEE SOCIETY HAD APPLIED FOR REGISTRATION U/S 12AA THEREFORE, THE QUESTION ARISE S AS TO WHETHER THE ASSESSEE SOCIETY IS ENTITLED TO SWIT CH OVER FROM THE PROVISIONS OF 10(23C)(IIIAD) TO 12A O F THE ACT. IT IS WELL ACCEPTED PROPOSITIONS OF LAW, AS H ELD IN VARIOUS CASES INCLUDING BY THE CO-ORDINATE BENCH IN THE CASE OF THE MANAGING COMMITTEE, ARYA HIGH SCHOOL VS . CIT (EXEMPTIONS), CHANDIGARH, ITA NO.469/ASR/2016 DECIDED ON 11.08.2017 TO THE EFFECT THAT CHOICE FOR CLAIMING THE BENEFIT IN EITHER OF THE PROVISIONS I. E. U/S 10(23C)(IIIAD) OR U/S 12 OF THE ACT IS THE PREROGAT IVE OF THE ASSESSEE AND THE REVENUE DEPARTMENT CANNOT DENY THE BENEFIT ONLY ON THE BASIS OF SWITCHING OVER FRO M THE PROVISIONS OF SEC.10(23C)(IIIAD) TO SEC.12 OF THE A CT BECAUSE THERE IS NO EMBARGO IN STATUTE OR LAW. NO DOUBT THE REVENUE DEPARTMENT IS AT LIBERTY TO CONSI DER THE OTHER RELEVANT CRITERIA AS PRESCRIBED BY LAW BU T NOT OTHERWISE. HENCE, IN OUR CONSIDERED VIEW THIS GROUN D OF REJECTION THAT EARLIER THE ASSESSEE WAS CLAIMING EXEMPTION U/S 10(23C) (IIIAD) OF THE ACT THAT IS WH Y THE ASSESSEE IS NOT ENTITLED TO GET REGISTRATION U/S 12 AA OF THE ACT, IS NOT SUSTAINABLE. 6.3 FURTHER, THE LD. CIT(EXEMPTIONS) WHILE DECLINING THE REGISTRATION ALSO FOCUSED THAT THE ASSESSEE HAS DONE NO ADDITION TO THE SCHOOL AND BUILDING PREMISE S OVER A PERIOD OF FIVE YEARS EXCEPT IN THE LAST YEAR DESPITE GENERATING LARGE SCALE SURPLUSES. IT HAS FU RTHER ACCUMULATED LARGE SCALE CASH IN HAND BALANCES WHICH CLEARLY SHOW THAT NOT ONLY HAS THE ASSESSEE GENERAT ED LARGE SCALE SURPLUSES BUT ALSO NOT UTILIZED THE SAM E IN ITA NO.470/ASR/2016 (A.Y.2016-17) BABA FARID PUBLIC WELFARE SOCIETY VS. CIT(E) 8 BETTERMENT OF FACILITY OF THE SCHOOL. IT WAS FURTHE R OBSERVED BY THE LD. CIT(E) THAT IT IS ALSO RELEVANT THAT THE CASH IN HAND BALANCES DO NOT FIT IN THE PRESCRI BED MODES AS ENVISAGED BY SEC.11 OF THE I.T. ACT, A CONDITION THAT IT SHOULD HAVE ADHERED TO GIVE THAT IT HAS BEEN CLAIMING EXEMPTION U/S 10(23C)(IIIAD). WE NOTE THAT THE LD. CIT(E) WHILE CONSIDERING APPLICATION FOR REGISTRATION U/S 12A OF THE ACT, I S NOT EMPOWERED TO ACT LIKE ASSESSING OFFICER . IF THE ASSESSEE HAS NOT BEEN FOLLOWING THE PRESCRIBED MODE S AS ENVISAGED BY SEC.11 OF THE ACT THEN CERTAINLY TH E ASSESSING OFFICER IS EMPOWERED TO TAKE APPROPRIATE ACTION FOR DECLINING THE BENEFIT TO THE ASSESSEE. I N THE ORDER, THE LD. CIT HIMSELF HAS ADMITTED THAT THE ASSESSEE HAS DONE ADDITION TO THE SCHOOL BUILDING PREMISES IN THE LAST YEAR WHICH GOES TO SHOW UTILIZ ATION OF THE FUNDS GENERATED BY THE ASSESSEE SOCIETY. FUR THER WITH REGARD TO THE OBJECTION OF THE LD. CIT(E) TO T HE EFFECT THAT THE ASSESSEE HAS ACCUMULATED LARGE SCAL E CASH IN HAND BALANCES WHICH CLEARLY SHOW THAT NOT O NLY THE APPLICANT HAS GENERATED LARGE SCALE SURPLUSES B UT ALSO NOT UTILIZED THE SAME IN BETTERMENT OF FACILIT Y OF THE SCHOOL. THIS IDENTICAL FACTS HAVE ALSO BEEN DEA LT WITH BY THE CO-ORDINATE BENCH IN THE CASE OF THE MANAGING COMMITTEE, ARYA HIGH SCHOOL VS. CIT(EXEMPTIONS) (SUPRA) WHEREIN THE CO-ORDINATE BEN CH WHILE RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DO WN IN QUEENS EDUCATION SOCIETY VS. CIT [2015] 372 ITR 69 9 (SC) HELD THAT EXCESS ACCUMULATION HAS BEEN APPLIED FOR THE OBJECTS OF THE SOCIETY ITSELF THEREFORE, TH ERE IS ITA NO.470/ASR/2016 (A.Y.2016-17) BABA FARID PUBLIC WELFARE SOCIETY VS. CIT(E) 9 NO HESITATION TO ALLOW THE REGISTRATION TO THE ASSE SSEE SOCIETY. FOR THE SAKE OF READY REFERENCE AND BREVIT Y, THE PRINCIPLES LAID DOWN BY THE APEX COURT IN QUEEN S EDUCATION SOCIETY VS. CIT (SUPRA) ARE REPRODUCED HEREIN BELOW. '11. THUS, THE LAW COMMON TO SECTION 10(23C)(IIIAD ) AND (VI) MAY BE SUMMED UP AS FOLLOWS. 1. WHERE AN EDUCATIONAL INSTITUTION CARRIES ON THE ACTIVITY OF EDUCATION PRIMARILY FOR EDUCATING PERSO NS, THE FACT THAT IT MAKES A SURPLUS DOES NOT LEAD TO THE CONCLUSION THAT IT CEASES TO EXIST SOLELY FOR EDUCA TIONAL PURPOSES AND BECOMES AN INSTITUTION FOR THE PURPOSE OF MAKING PROFIT. 2. THE PREDOMINANT OBJECT TEST MUST BE APPLIEDTHE PURPOSE OF EDUCATION SHOULD NOT BE SUBMERGED BY A PROFIT MAKING MOTIVE. 3. 4. A DISTINCTION MUST BE DRAWN BETWEEN THE MAKING OF A SURPLUS | AND AN INSTITUTION BEING CARRIED ON 'FO R PROFIT'. NO INFERENCE ARISES ' THAT MERELY BECAUSE IMPARTING EDUCATION RESULTS IN MAKING PROFIT, IT BECOMES AN A CTIVITY FOR PROFIT. 5. IF AFTER MEETING THE EXPENDITURE, A SURPLUS ARISES INCIDENTALLY FROM THE ACTIVITY CARRIED ONLY THE EDU CATIONAL INSTITUTION, IT WILL NOT; CEASE, TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES. 6. THE ULTIMATE TEST IS WHETHER ON AN OVERALL VIEW OF THE MATTER IN THE CONCERNED ASSESSMENT YEAR THE OBJ ECT IS TO MAKE PROFIT AS OPPOSED TO EDUCATING PERSONS. 6.3 IN THE INSTANT CASE IT IS NOT IN CONTROVERSY THAT ASSESSEE SOCIETY HAS MADE THE ADDITION TO THE SCHOO L BUILDING IN THE LAST YEAR (2015) ITSELF AS OBSERVED BY THE LD. CIT(E) WHICH GOES TO SHOW THE ADDITION TO T HE SCHOOL BUILDING IS CERTAINLY FOR THE BENEFIT OF THE PUBLIC AT LARGE. AS IT REFLECTS FROM THE BALANCE SHEET AS ON 31.03.2015 (PAGE 31 OF THE PB) THE ASSESSEE HAS ITA NO.470/ASR/2016 (A.Y.2016-17) BABA FARID PUBLIC WELFARE SOCIETY VS. CIT(E) 10 INVESTED RS.18,72,224/- IN FIXED ASSETS AND VARIOUS EXPENSES HAVE BEEN INCURRED FOR SMOOTH RUNNING OF T HE SCHOOL, AS IT APPEARS FROM THE INCOME AND EXPENDITU RE ACCOUNT OF THE YEAR ENDING 31 ST MARCH, 2015 (PAGE 32 & 33 OF THE PB). FURTHER AS PER ANNEXURE-A TO THE INCOME AND EXPENDITURE AS ON 31.3.2015 (PAGE NO.34 OF PB), THE ASSESSEE HAS INCURRED THE VARIOUS AMOUN TS SUCH AS RS. 3,69,250/- FOR MAKING ADDITION IN BUILD ING, RS.2,00,000/- IN INSTALLATION OF CCTV CAMERA, RS.20,000/- FOR INSTALLING RO SYSTEM, RS.33,000/- F OR LED, RS.17,500/- FOR INVERTORS AND RS.13,000/- FOR FURNITURE AND FIXTURE, WHICH AGAIN GOES TO SHOW THA T THE ASSESSEE SOCIETY IS DOING CERTAIN WORKS IN PURSUANC E TO ITS AIMS AND OBJECTS. AS IT IS WELL SETTLED BY APEX COURT IN THE CASE OF QUEENS EDUCATION SOCIETY (SUPRA) THA T A DISTINCTION MUST BE DRAWN BETWEEN THE MAKING OF A SURPLUS AND AN INSTITUTION BEING CARRIED ON FOR PRO FIT. FURTHER IF AFTER MEETING THE EXPENDITURE, A SURPLUS ARISES INCIDENTALLY FROM THE ACTIVITY CARRIED BY TH E EDUCATIONAL INSTITUTION, IT WILL NOT CEASED TO BE O NE EXISTING SOLELY FOR EDUCATION PURPOSES. FURTHER THE ULTIMATE TEST IS WHETHER ON AN OVERALL VIEW OF THE M ATTER IN THE CONCERNED ASSESSMENT YEAR THE OBJECT IS TO MAKE PROFIT AS OPPOSED TO EDUCATING PERSONS. IN THE INSTANT CASE, AS REFL ECTS FROM THE INCOME AND EXPENDITURE ACCOUNT FOR THE END ING 31 ST MARCH, 2016 FOR THE ASSESSMENT YEAR RELEVANT TO THE FINANCIAL YEAR 2005-16, THE TOTAL GROSS RECEIPT S WHICH INCLUDES FEES FROM THE STUDENTS, INTEREST INC OME, MISCELLANEOUS INCOME, MISCELLANEOUS FUNDS AND STANDARD SCHOLARSHIP WAS RS.86,56,943/-, WHEREAS TO TAL EXPENDITURE FOR RUNNING THE SCHOOL WAS RS.83,10,282 /- ITA NO.470/ASR/2016 (A.Y.2016-17) BABA FARID PUBLIC WELFARE SOCIETY VS. CIT(E) 11 AND THE ASSESSEE INCIDENTALLY EARNED THE INCOME OF RS.3,46,661/- ONLY. HENCE, IN VIEW OF THE DICTUM OF QUEENS EDUCATION SOCIETY (SUPRA) IT CAN-NOT BE CONSTRUED THAT THE ASSESSEE IS INVOLVED IN MAKING T HE PROFIT AND THUS OPPOSED TO THE EDUCATING PERSONS. FURTHER THE INFERENCE ALSO CANNOT BE DRAWN THAT THE ASSESSEE SOCIETY INCIDENTALLY ACCUMULATED LARGE SCA LE CASH, THEREFORE, THE SOCIETY IS RUNNING SCHOOL FOR NON- CHARITABLE PURPOSES AND/OR FOR COMMERCIAL PURPOSES. 6.4 THE LD. CIT(E) ALSO OBSERVED THAT IN THE INSTANT CASE, GIVEN ALL OF THE ABOVE, THERE IS NOWHERE THE GENUINENESS OF THE ACTIVITIES OF THE SOCIETY CAN BE CORROBORATED WITH THE STATED AIMS AND OBJECTS. AS WE HAVE ALREADY OBSERVED ABOVE THAT THE SOCIETY IS CLAIMING EXEMPTION U/S 10(23C)(IIIAD) WHICH CAN ONL Y BE CLAIMED BY THE UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE S AND IT IS NOT THE CASE OF THE REVENUE THAT THE BENEFIT OF SECTION 10(23C)(IIIAD) HAS EVER BEEN DENIED TO THE ASSESSEE, THEREFORE IN OUR CONSIDERED OPINION, STRENGTHEN THE CASE OF THE ASSESSEE THAT THE ACTIVI TIES OF THE SOCIETY ARE COROLLARY TO THE STATED AIMS AND OBJECTS OF THE SOCIETY AND WHILE DEPARTING EDUCATIO N, THE ASSESSEE IS CONTINUING WITH ITS AIMS AND OBJECT S. ON THIS ASPECT WE ALSO FOUND SUPPORT FROM THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF THE MANAGING COMMITTEE, ARYA HIGH SCHOOL VS. CIT(E), CHANDIGARH (SUPRA). ITA NO.470/ASR/2016 (A.Y.2016-17) BABA FARID PUBLIC WELFARE SOCIETY VS. CIT(E) 12 6.5 FROM THE ORDER, IT ALSO REFLECTS THAT THE LD. CIT( E) ALSO OBSERVED THAT THE APPLICANT HAS PERSUADED NO OTHER OBJECT APART FROM RUNNING SCHOOL IS MISCONCEI VED. WE REALIZED THAT THIS OBSERVATION OF THE LD. CIT(E) IS BASED ON THE CONJECTURE AND SURMISES WITHOUT ANY BASIS. 6.6 FURTHER, THE LD. CIT(E) ALSO OBSERVED THAT ORIGINA L OF THE PAPERS FOR FORMATION OF THE SOCIETY REGISTRA TION AND THE BYE LAWS WERE NOT FURNISHED. IT WAS FURTHER OBSERVED THAT IT IS SEEN FROM THE PAPER FILES, THAT RULES AND REGULATIONS ARE NOT REGISTERED NEITHER HAS ANY EVIDENCE BEEN APPENDED IN SUPPORT OF ITS DISSOLUTIO N UNDER THIS EFFECT. IN OUR CONSIDERED VIEW THIS OBSERVATION OF THE LD. CIT(E) IS RIGHT AS HE IS ENT ITLED TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES. 6.7 THEREFORE, IN THE PECULIAR FACTS AND CIRCUMSTANC ES AND ON THE AFORESAID OBSERVATIONS AND ANALYZATIONS, FOR SUBSTANTIAL JUSTICE, WE DIRECT THE LD. CIT(E) TO GR ANT THE REGISTRATION TO THE SOCIETY FROM THE DATE OF APPLICATION, WITHIN 90 DAYS FROM THIS ORDER, HOWEVE R ORDER SHALL BE SUBJECT TO THE PRODUCTION OF THE ORI GINALS AND REGISTERED MEMORANDUM OF SOCIETY AND RULES AND REGULATIONS OF THE SOCIETY. WE CLARIFY THAT THE ASSESSEE SHALL CO-OPERATE IN THE PROCEEDINGS AND SHALL SUBMIT THE DOCUMENTS AS REFERRED ABOVE TO THE LD. CIT(E) WITHIN 30 DAYS OF THE RECEIPT OF THIS ORDER, FAILING WHICH THE LD CIT(E) SHALL BE AT LIBERTY TO DRAW ADVERSE INFERENCE IF ANY. ITA NO.470/ASR/2016 (A.Y.2016-17) BABA FARID PUBLIC WELFARE SOCIETY VS. CIT(E) 13 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE SOCIETY IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 04.06.2019. SD/- SD/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:04.06.2019 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) BABA FARID PUBLIC WELFARE SOCIETY, BATHINDA. (2) THE CIT (EXEMPTION), CHANDIGARH. (3) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER